On July 29th, Steven Stamkos signed a three-year entry level deal worth $2.625 mil in total salary with another $8.55 mil available in incentives.
He’ll count against the cap for $3.725 mil this season - but how much he’ll actually take home is an entirely different and much more complicated story. And it’s a story that hasn’t been written about much from what I’ve been able to find. Fortunately, I’ve obtained a copy of Evgeni Malkin’s current Standard Player’s Contract (SPC) and I think it’s a great tool to help explain how entry level contracts really work.
The salary + bonus range for a successful young player can range drastically – the CBA allows for varying degrees of success and only pays the top young players the top money. If Stamkos really wants to bring home the big bucks in the first three years of his deal, it’s possible but the targets are tough.
Evgeni Malkin won the Calder after putting up 33 goals and 85 points. He earned $2,046,700 that year in salary, team and league bonuses that year.
The year prior, Alex Ovechkin had won the Calder after posting 52 goals and 106 points.
Assuming a similar bonus structure (a fair assumption given that Malkin received the ‘best available’ under the CBA – both in terms of number of bonus categories and scale of individual bonuses), Ovechkin’s total first-year package was worth 225% of Malkin’s - his pre-tax earnings hit $4,596,700.
There are six components within the Entry Level Compensation system to consider:
1. Salary (NHL & AHL)
2. Signing Bonus
3. Games Played Bonus
4. Individual “A” Bonuses
5. Individual “B” Bonuses
6. League-wide Awards/Trophies and League Performance Bonuses Paid by League
Instead of describing the document for you, I’ve decided to post the relevant pages of the deal in their entirety and then talk about each component of the compensation structure and then look at how much Malkin has earned compared to other recent high picks.
The Standard Player’s Contract template is available in Exhibit 1 of the Collective Bargaining Agreement. As formatted in that document, the contract is 11 pages in total. I’m only posting pages 1, 2 & 11 as the other sections are standard – maybe we’ll take a look at those terms another time.
Page One and Two list Malkin’s NHL and AHL salary by year under the deal and page 11 you’ll see the signatures of all the relevant parties including Ray Shero, J.P. Barry, Evgeni Malkin & Gary Bettman. I’ve removed Malkin’s home address but all other details are included:
The next three pages are much more interesting. Titled Addendum “A”, this document breaks down Malkin’s signing bonus and bonuses available:
Before we get to the numbers, here’s a description of each compensation category:
1. Salary (NHL & AHL)
Malkin’s year-by-year NHL salary is listed both on page one of the SPC and Page One of Addendum “A”:
2006/07: $688,940
2007/08: $688,940
2008/09: $984,200
Since Malkin was drafted prior to the new CBA, the maximum salary from his draft class (2004) was listed in the expired CBA - $1,295,000. Unfortunately for Evgeni, that maximum salary was subject to the same 24% rollback that all players under contract experienced, bringing the 2004 class maximum to $984,200.
Under the new CBA, the maximum NHL salary, Signing Bonuses and games played bonuses for rookies from each draft class are:
2005: $850,000
2006: $850,000
2007: $875,000
2008: $875,000
2009: $900,000
2010: $900,000
2011: $925,000
Thus, Stamkos’ maximum for three years is the same as Patrick Kane’s $875,000 x 3 = $2,625,000 and Hedman/Tavares will be able to sign for $900k per.
Maximum AHL Salaries under the current CBA started at $62,500 for 2005-2006 draft years, increasing by $2,500 every two years.
2. Signing Bonus
Malkin’s signing bonus is broken up into six payments that total $295,260 in Year One and $295,260 in Year Two. Those numbers may seem random but they’re not. If you take the signing bonus + the salary in each of those first two years you get $984,200 – the maximum listed above. As mentioned, the signing bonus is included in that maximum and is not incremental.
As well, $295,260 is exactly 30% of $984,200 and if you read the fine print on page 287, the section dealing with SPCs for Unsigned Draft Choices at the time the new CBA took effect you’ll see that is the maximum signing bonus for these players.
Starting with the 2005 draft class, the new maximum signing bonus is just 10%, so recent deals for top picks would surely include annual lump sum payments totaling $87,500.
3. Games Played Bonus
Per section 9.3(b), “Games played bonuses attributable to a League Year shall be included in compensation for that League Year at their full potential value (ie assuming all such bonuses are earned) and shall be treated as Paragraph 1 NHL Salary.”
Malkin’s contract did not contain a games played bonus.
One of the most ‘famous’ examples involving this type of bonus in recent years was when the Kings signed undrafted Wisconsin defenceman late in the 2006-07 season. As an undrafted UFA, Piskula was subject to the maximum in the preceding draft (2006 - $850,000) and since he was already 23, his SPC was a two-year deal.
In order to entice Piskula to sign with LA, Dean Lombardi offered him games played bonuses of $25k for playing one, three and five games. For the five games he played, Piskula received the pro-rated portion of the $850k, his signing bonus (undisclosed – up to 10% of total) and his games played bonuses.
One more thing to consider is that under the CBA there is also a minimum Paragraph 1 Salary:
2005-06: $450,000
2006-07: $450,000
2007-08: $475,000
2008-09: $475,000
2009-10: $500,000
2010-11: $500,000
2011-12: $525,000
The difference between the max (which includes signing bonus & games played bonus) and the minimum (which is simply Paragraph 1 Salary) is just $400k.
4. Individual “A” Bonuses
Per Exhibit 5 (1), “The maximum amount payable for any single category of Individual “A” Bonuses identified below is $212,500 per season. (For example, an Entry Level SPC may not contain bonuses of $212,500 for 20 goals and an additional $212,500 for 30 goals, provided, however, it may contain a bonus of $100,000 for 20 goals and $112,500 for 30 goals). An Entry Level SPC may contain any number of Individual “A” Bonuses; however, a Player may not receive more than $850,000 in total aggregate Individual “A” Bonuses per season. Individual “A” Bonuses are payable by the Clubs as opposed to the League).”
(a) Forwards
(i) Ice time (aggregate and/or per Game). Player must be among top six (6) forwards on the Club (minimum 42 Regular Season Games played by Player and comparison group). (Note: an Entry Level SPC may contain bonuses for both aggregate and per Game ice time; however, the maximum aggregate amount the Player may receive on account of the ice time category is $212,500.)
(ii) Goals: 20 Goal Minimum
(iii) Assists: 35 Assist Minimum
(iv) Points: 60 Point Minimum
(v) Points Per Game: .73 Points per Game Minimum (minimum 42 Regular Season Games played)
(vi) Plus-Minus Rating: Among top three (3) forwards on the Club (Minimum 42 Regular Season Games played by player and comparison group).
(vii) End-of-Season NHL All-Rookie Team
(viii) NHL All-Star Game (selected to play or plays)
(ix) NHL All-Star Game MVP
(b) Defensemen
Categories are the same with the addition of blocked shots (top 2 on Club). The thresholds vary for blueliner categories: (i) top 4 defencemen for ice time, (ii) 10 Goal Minimum, (iii) 25 Assist Minimum, (iv) 40 Point Minimum, (v) .49 PPG, (vi) Top 3 +/- among defencemen.
(c) Goaltenders
(i) Minutes Played: 1,800 minutes minimum
(ii) GAA: GAA =< median GAA of all goaltenders (25 game minimum, 30 minute minimum)
(iii) Save %: Save % >= media save % of all goaltenders (25 game minimum, 30 minute minimum)
(iv) Wins: 20
(v) Shutouts: Shutouts >= median number of shutouts of all goaltenders
(vi – viii) End-of-Season NHL All-Rookie Team, NHL All-Star Game (selected to play or plays), NHL All-Star Game MVP
As you saw in Malkin’s contract, he’s eligible to receive Individual A bonus money in all nine of the categories that are listed in the CBA, at the minimum performance levels and maximum value ($212,500 per).
5. Individual “B” Bonuses
Exhibit 5(2): “A Player and Club may also negotiate individual bonuses payable by the Club for the League-wide Awards/trophy Bonuses and League Performance Bonuses set forth below, except where specifically stated otherwise, in amount to be individually negotiated between a Club and a player (the Club and Player could agree to pay more, or less than the amounts payable by the League, set forth below). The maximum aggregate amount that a Club can pay a Player (in addition to any amounts paid by the League to such Player) on behalf of a Player’s Individual “B” Bonuses is $2 million per season. There is no limit on the quantity (as opposed to the dollar amount) of League-wide Awards/Trophies and League Performance Bonuses a Player may receive from the Club.”
Here are the categories eligible for Individual “B” Bonuses
Top 5 Award Finish: Hart Trophy, Rocket Richard Trophy, Norris Trophy, Vezina Trophy and Frank J. Selke Trophy.
Award Winner: William Jennings Trophy and Conn Smythe Trophy
End of Year All-Star: 1st Team or 2nd Team
Forwards:
Top 10 Goals, Assists, Points, PPG (min 42 GP)
Defencemen:
Top 10 Goals, Assists, Points, PPG (min 42 GP) and Ice time among defencemen (aggregate and/or per game)
Goaltenders
Top 5 GAA, SVP, Wins
Again Malkin has all the bonuses possible to be obtained under the CBA included in his deal and in order to receive the max $2 mil Individual “B” bonus, he just needs to hit on one of the categories listed.
There’s no denying that these bonuses are tough to achieve for a young player. But this season the so-called ‘bonus cushion’ has been removed and all bonuses are included against the cap, whether likely to be obtained or not. So Tampa has $2 mil tied up in cap space for Stamkos, just in case he cracks the top ten scorers or finishes top 5 in Hart voting.
It’s very likely that there will be no cushion in 2010-11 or 2011-12 either (because each season could also be the last under the current CBA) which means that we may see teams making more Individual B bonuses available to their rookies in able to get to the salary floor – unless the league rules that would circumvent the cap.
You would think that it would have been in the League and Player Association’s best interests to negotiate a clause to remove Individual “B” bonuses from this year’s cap calculation, creating more room for cap strapped teams and more payroll room for the players (given the unlikelihood of those “B” bonuses actually being achieved). But then again there are teams like Los Angeles that would certainly object, because that would force them to spend close to $2 mil in cash instead of using Doughty’s bonus to get to the floor.
The last thing worth mentioning for both Individual “A” and “B” bonuses is that they do force a player to actually earn the bonuses, meaning that hypothetically if a player hurts himself riding a golf cart and misses a significant portion of the season he would only earn his salary + signing bonus for the season. Given that a player can double his takehome pay with fairly easy “A” bonuses, entry level players have a ton of incentive to minimize injuries at all cost.
6. League-wide Awards/Trophies and League Performance Bonuses Paid by League
Exhibit 5(2): “Every Player party to an Entry Level SPC shall automatically be deemed eligible for the Individual “B” Bonuses listed below, which, if earned shall be payable by the League in the amounts set forth below. There is no limit on the number of League-wide Awards/Trophy Bonuses and League Performance Bonuses that an individual Player may earn in a League Year that are payable by the League. For example, if a Player finishes 2nd in the Hart, 3rd in the Selke and 1st in the Lady Byng, he will receive all bonus amounts associated with each such League-wide Award/Trophy Bonus. In addition, if he also finishes 3rd among NHL forwards in goals, 2nd in points, and 4th in points per Game, he would also receive all bonus amounts associated with such bonuses.”
(a) League-wide Awards/Trophies:
(i) Top five for the Hart, Norris, Vezina, Selke or Richard Trophy
Winner: $250,000, 2nd: $200,000, 3rd: $150,000, 4th: $100,000, 5th: $50,000
(ii) Top three for the Lady Byng Trophy
Winner: $150,000, 2nd: $100,000, 3rd: $50,000
(iii) Jennings winner: $50,000
(iv) Calder Trophy
Winner: $212,500, 2nd: $150,000, 3rd: $100,000
(v) Official NHL All-Star Team (year-end)
1st Team: $100,000, 2nd Team: $50,000
(vi) Conn Smythe Trophy winner: $250,000
(b) League Performance Bonuses:
(i) Top Ten forwards in the League in goals, assists, points or PPG (min 42 GP)
Goals, Assists & Points (PPG bonus in parenthesis)
Winner: $150,000 ($100,000)
2nd: $140,000 ($90,000)
3rd: $130,000 ($80,000)
4th: $120,000 ($70,000)
5th: $110,000 ($60,000)
6th: $100,000 ($50,000)
7th: $90,000 ($40,000)
8th: $80,000 ($30,000)
9th: $70,000 ($20,000)
10th: $60,000 ($10,000)
So now that you have a good understanding of how the system works, let’s take a look at how much Malkin has actually earned over his first two seasons, and also how much the four most recent #1 picks have fared:
There is a huge difference between a fantastic season, a great year and an average one under the entry level system:
Hopefully Mr. Stamkos has been taking notes – the bar is really high and there’s a lot of money at stake.
The difference between three Ovechkian seasons and three Kanelike years?
$8,197,600.
Danny –
[email protected]
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